CGS-CIMB raises target price for Kawan Food to RM2.40

KUALA LUMPUR (June 22): CGS-CIMB Research has maintained its “Add” rating on Kawan Food Bhd at RM1.75 with a higher target price (TP) of RM2.40 (from RM2) and said it turned more positive on Kawan as the company expects to benefit from higher demand for frozen food as well as ongoing efforts to drive better cost efficiencies.

In a note June 20, the research house said it raised its FY20-22F EPS for Kawan by 3.9-6.9% to account for: i) higher operating efficiencies and ii) an increase in export sales.

“Going forward, we expect Kawan to record better margins. This is backed by efforts to improve cost efficiencies, with continuing capex (we estimate RM20 million annually) to upgrade its production lines and install new technology to reduce wastage.

“In addition, Kawan’s margins should also improve in tandem with higher economies of scale as its sales (exports and local) continue to rise with better marketing efforts.

“Maintain Add, with a higher TP of RM2.40 (26x CY21 P/E),” it said.